Even a 2% wealth tax on billionaires can raise a lot of money for social infra

What are the key reforms the government should undertake to reduce inequality?

- Thomas Piketty Professor, Paris School of Economics

I would recommend having a very ambitious plan for tax justice in India, asking the richest Indians, who have benefitted the most in the past 10-20 years, to just give back a part of their new wealth accumulation to pay for investment in India's public services, such as education and health. You are not going to close the productivity gap by making dismissing a worker easier. If you want to close the productivity gap, it will have to come from such an ambitious plan.

Those with annual income above ₹15 lakh are taxed at 30 per cent in India. What would be the ideal income-tax slab for the rich in India?

The real problem is that the very rich do not report a lot of income. So, if you take top billionaires, some have become very rich in India lately by using the infrastructure of India, education system of India, sometimes connections to the government, and public procurement market. The income they report on their income-tax returns is maybe 0.01 per cent of their wealth. If you take the people with several dozen billions of dollars in wealth, let the tax administration tell us the average income of the top 100 Indians, or the top 20 Indians, and compare with the 100 wealthiest or 20 wealthiest. You will see that the income they report is 0.01 per cent of their wealth. So, you can tax income at 90 per cent if you want. But that is not the issue. Whether the tax rate should be 30 or 40 per cent, or 90 per cent, is not the issue for these very top billionaires. The issue is to tax the wealth itself. What we show in our work is that even a 2 per cent (wealth) tax on the very top billionaires will raise a lot of money. (32nd US President Franklin D) Roosevelt had a 90 per cent top income-tax rate, which worked quite well in the US. But before talking about this, we can do a lot by putting a very small tax rate on very high-wealth people.